Despite a very volatile year the Irish equity market as measured by the ISEQ Index rose by 9 per cent in the nine months to end September. Compared with international markets, this is a creditable performance. Over the same period the Dow Jones Index declined by 6.4 per cent, while the FTSE 100 Index fell by 6.5 per cent. Across Europe the FTSE Eurotop 300 Index rose by 5 per cent.
Overall Europe has outperformed in local currency terms. However, if the impact of the weak euro is taken into account, the US markets have done better because of the very strong dollar.
While Elan Corporation has played a major role in boosting the Irish market, recent gains by the financials have begun to impact favourably. The table shows the year-to-date returns for the five best and worst performing shares. Given all of the hype surrounding the technology sector it is perhaps not surprising to find that new economy stocks account for two of the top five.
Iona Technologies has doubled so far this year, while Horizon Technology is not far behind with a rise of 86 per cent. The share prices of both of these companies are extremely volatile and both suffered during the Q2 sell-off in the technology sector. Once overall investor sentiment turned positive, Iona and Horizon proved to be high on investors' buy lists.
Even though technology has been grabbing all of the headlines, old economy companies fill two of the top five positions. IFG Group, a small financial services company, has bucked the gloomy trend for financials, and its share price has almost doubled since the start of the year.
The food sector has been one of the worst performing sectors of the stock market for several years now. Therefore, it is not surprising to find that two of the worst returns have come from Fyffes and Glanbia. Glanbia's shares have been in decline for several years now and there still seems to be very little light at the end of the tunnel.
The under-performance from Fyffes has not been quite so prolonged. Indeed, earlier in the year the Fyffes share price enjoyed a brief bout of dot.com euphoria as its plans to develop e-commerce business were greeted enthusiastically by the market. At their peak the shares had doubled in a short space of time. Unfortunately for shareholders the decline was even more precipitate, as the bursting of the technology bubble was accompanied in Fyffes case by a profit warning regarding the underlying fruit business.
In contrast IAWS Group has proved that all need not be gloom in the food sector. After several years of good returns, the company's share price has continued to perform strongly during 2000. Management's strategy of moving closer to the consumer through its Cuisine de France and Pierre's brands has proved highly successful.
Revenues have grown and profit margins have widened, proving that very attractive returns can be achieved in the old economy sectors of the market. Nevertheless, of the laggards, Eircom is the only new economy stock and it has been afflicted by its own particular problems. Possibly the performance from the Smurfit Group has been one of the most disappointing from the leading industrial stocks. The picture that emerges highlights that the current fashion of categorising shares into new and old economy sectors is not particularly helpful. Investors who succeed in picking good companies, irrespective of sector, will be well rewarded.
